Olmsted Medical Center: Generating new revenue with the CommerceHealthcare® AP Card.

Olmsted Medical Center (OMC) has experienced financial and operational pressures resulting from the pandemic. Revenue recovery is an imperative with a continuing need to explore avenues of incremental growth. OMC is a non-profit integrated health system serving Rochester, Minn., and the southeastern part of the state since 1949. The system has approximately 190 clinicians and employs more than 1,300 healthcare professionals. Its care sites include a Level IV trauma hospital and a range of multi-specialty, community and walk-in clinics. OMC cares for more than 330,000 patients annually, and the hospital has received a 5-star rating from the Centers for Medicare and Medicaid Services.

Accounts Payable (AP) credit card challenges.

Six years ago, OMC sought additional income and administrative efficiencies by instituting a virtual credit card program to pay its suppliers. A major financial card company was selected following a multi-vendor evaluation. That firm estimated a six-figure potential revenue share for the health system.  

“Unfortunately, the program floundered for several years,” recounted Chuck Meyer, Financial Services Manager. He cited several problems:  

• Narrow candidate criteria. Meyer believed the company was too restrictive in its view of potential supplier card candidates.
• Turnover in account representation. The company cycled through several representatives assigned to the OMC account.
• Communications. Over time, communication became minimal. 

The results were disappointing. “After five years, we had only 42 suppliers on the card program and only half were active,” said Meyer. “Needless to say, our revenue share was minimal and well short of expectations.” 

Spend file analysis reveals significant opportunity.

Change was clearly in order. OMC became aware of CommerceHealthcare^®, whose solutions are provided by Commerce Bank, through the Minnesota Hospital Association. The bank is one of a select group of Endorsed Business Partners who have passed the association’s vetting process to provide members with best-in-class vendors. 

CommerceHealthcare^® conducted a spend file analysis, the bank’s recommended first step. This review typically uncovers many overlooked opportunities. The analysis identified over five times more cardable spend. Meyer commented that “we had an intuitive sense of the gap but were a bit surprised when we quantified the actual magnitude.”

Solution: CommerceHealthcare^® AP Card.

OMC decided to implement the CommerceHealthcare^® AP Card, a supplier payment management program that replaces paper checks with a virtual credit card to make electronic payments. Health systems, hospitals and physician practices earn monthly revenue share and suppliers gain frictionless payments. 

CommerceHealthcare^® exercises a proven enrollment playbook to maximize supplier use of the card. Ongoing enrollment diligence is key.

The AP Card program respects workflows and banking relationships currently in place. Jan Fritz of the AP department observed that the bank “uses our normal AP process, with the only variant being at the point of payment.” She also mentioned several user-friendly system features:

• Drag and drop for easy file upload
• Confirmation of receipt within minutes
• Rapid status feedback during account onboarding

This sensitivity to workflow is “absolutely key to staff satisfaction and efficiency,” according to Fritz. 

Chuck Meyer was also impressed with the bank’s confidence in its abilities to meet its forecasts. “They showed a real commitment to us.” 

Implementation and program management.

The no-cost implementation process is designed to produce a seamless transition. Rochelle LaFortune, payroll & AP supervisor, admitted “we were initially skeptical of promises of smooth implementation, based on our previous vendor experiences.” However, she described the bank’s approach as providing:

• Effective system setup and staff training.
• Easy handoff to the maintenance team.
• Prompt, responsive customer service.
• Useful, accessible information on the AP Card website to resolve vendor issues.
• Steady outreach to enroll new vendors.

The OMC team described the bank’s service as diligent, consistent, accountable, organized. LaFortune appreciates the policy of conducting regular review meetings even when no pressing issues are on the table. “It’s easy to let things slide if you don’t maintain the discipline.”

Rapid results, positive growth.

Within only a few months of going live, AP Card had already tripled charge volume from the previous program. For the first full year, OMC has earned the six-figure potential that had eluded their previous virtual card provider.

Vendor enrollment has also been impressive. CommerceHealthcare^® has signed up 500 suppliers. LaFortune noted “we are probably nearing our maximum for now as a result of the diligence.”

OMC has already reached the next tier in the AP Card program which will further boost revenue share.

OMC anticipates continued growth. Chuck Meyer believes the momentum already established could translate into outstripping the conservative forecast over the next twelve months.

Another important yardstick for measuring a virtual card program is vendor satisfaction. LaFortune indicated that reception has been good with minimal complaints. Reaction from smaller vendors has been strong. A few expressed concerns about fees, and some had special processing needs or technical issues, but nearly all favor the cash flow benefits of faster payments. This reaction confirms the bank’s experience. Many believe virtual card payments are suitable only for select higher volume suppliers, but AP Card has been successfully applied across the vendor spectrum.  

Value added.

OMC has derived additional benefits from AP Card beyond revenue share:

• Staff time gains. The AP department is fielding fewer calls and spending little time resolving vendor issues as CommerceHealthcare^® handles most of the program administration. LaFortune sums it up, “They took a lot of responsibility off our plate.”
• More electronic payments. AP is no longer burdened with time-consuming and expensive processing of 100 paper checks each week.
• Enhanced analytics. Reporting and benchmarking enable administrators to analyze their payments experience.
• Personalized bank relationship. Unlike some firms, CommerceHealthcare^® assigns a team to each account rather than a solo representative. That minimizes turnover exposure and helps build personal relationships with every client. 

Meyer concluded by stressing the importance of people in the equation. “The relationship makes everything work.” 

CommerceHealthcare^® solutions are provided by Commerce Bank.